Brent heads for worst week in six at below $98 on weak demand

ReutersPTI Updated - March 12, 2018 at 09:18 PM.

Both WTI and Brent traded at multi-month lows on September 11, 2014, before bouncing back to close higher.

Brent crude fell below $98 a barrel on Friday, heading for its worst week in six, as concerns over weak demand outweighed geopolitical worries in the Middle East and Ukraine.

Weaker oil demand in China and Europe had caused growth in global oil demand to soften at a remarkable pace, the International Energy Agency said in its monthly report released on Thursday.

The West's energy watchdog cut its demand growth projections by 150,000 barrels per day (bpd) to 900,000 bpd for 2014 and by 100,000 bpd to 1.2 million bpd in 2015.

Brent is down 3 per cent for the week so far, headed for its biggest weekly loss since the week to August 1. The October contract fell 28 cents to $97.80 by 0316 GMT after a 4-cent gain in the previous session snapped a 5-day losing streak.

Bearish outlook

Singapore’s United Overseas Bank said oil prices were under pressure due to the bearish outlook for global demand growth by the IEA.

The IEA, which advises on energy policy to industrialised nations, had yesterday said that crude demand will likely grow 1.0 per cent this year, or 900,000 barrels per day, down from a previous estimate of 1.0 million barrels a day.

It said the slowdown was due to “ongoing weakness in both European and Chinese economies, coupled with lower-than-expected oil deliveries in Japan and Brazil’’.

Geopolitical fears still linger

Both WTI and Brent traded at multi-month lows yesterday before bouncing back to close higher. WTI closed $1.16 higher in New York, while Brent gained four cents in London.

Brent bounced from a 2-year low on Thursday after Russia warned the US that air strikes in Syria against Islamist militants would be an act of aggression without a UN security mandate. This raised the spectre of a new confrontation between Moscow and the West.

"I would like to see more risk premium priced in but the market doesn't want to," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"There is still a lot of potential concerns, but the market seems relaxed by it all."

Geopolitical worries included Russia, which is facing fresh sanctions from the European Union and the US over the Ukraine crisis, McCarthy said.

The EU will implement tougher sanctions against Russia later on Friday, although they could be removed if Moscow abides by a ceasefire between Kiev and pro-Russian separatists. However, Russia called the new measures anti-peace.

The United States will also release details later on Friday of its own new sanctions against Russia which are expected to target Sberbank, Russia's largest bank, and further limit Russian banks' access to U.S. capital.

Investors are waiting for industrial and retail sales data from China on Saturday to assess whether a recovery in the world's second largest economy is picking up steam.

The market is also keeping an eye on Iran which faces a "difficult road" to reach an agreement with six world powers over Tehran's nuclear programme by a late November deadline, a senior Iranian negotiator said on Thursday.

Snapshot

Oil demand growth slows at remarkable pace on China, Europe - IEA

IEA cuts global oil demand growth forecast for 2014, 2015

Geopolitical tensions ratchet up over Syria

Published on September 12, 2014 04:26